Tuesday

Health care tax = socialized medicine = eugenics?


What a tax on health benefits may mean
Congress is considering limiting the tax exclusion on employer-sponsored health benefits to save the federal government billions of dollars that could to help pay for comprehensive health care overhaul.

To be honest I couldn’t even get past the headline and short synopsis before the bile began to rise in my throat. The line “to save the federal government billions” stood out like a stripper at a Bar Mitzvah. This statement presumes that the money is the governments to begin with and in some way they are wasting it by allowing the peasants who earned it to keep it. This is the fundamental problem with politicians; they believe that money is the governments to give and take as they see fit.

The article follows:

By MarketWatch
A tax break that many workers don't even realize they have has become a pawn in the chess game of health care overhaul as lawmakers look for ways to pay for a reform that would reduce costs, boost quality and extend coverage to more Americans.

The above paragraph is full of suppositions and opinions that are simply not supported by any substantive facts. Every country that has some form of socialized medicine is finding that it is rarely adequate and mostly rationed. To the average person that means your life and death struggles are reduced to a cost/benefits analysis. Pray you are found “worthy” should you find yourself with a catastrophic illness.

The tax exclusion for the value of workers' health benefits represents one of the most substantial sources of funding for comprehensive health overhaul efforts, many economists say.

It is simply another tax that this administration intends to straddle us with. Along with cap and trade, and value added taxes the average American will find their paychecks dwindling while the costs of everything they buy rising exponentially; in a recession no less.
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As legislators scramble to come up with ways to finance the upfront cost, which is projected at around $1 trillion over 10 years, they are increasingly considering options for imposing a dollar limit on the amount of premiums for employer-sponsored coverage that can be excluded from taxable income.

It is a tax, please call it what it is a tax. I hate the semantic game of calling a tax an exclusion of a tax break. The bottom line is that it will cause a drop in the real income of Americans.

When it comes to raising money for an overhaul, no other strategy comes close. The tax exclusion for employer-sponsored health benefits is set to reduce federal tax revenues by an estimated $3.5 trillion between 2010 and 2019, according to the Urban Institute.

No draft legislation calls for raising that whopping sum through total elimination of the tax exclusion. But capping it above a certain threshold to shore up a fraction of its potential value has bipartisan support, even though any kind of tax increase remains politically sensitive.

At least they got the wording right this time.

"Historically, this has been a sacred cow," said Michael Thompson, a principal with PricewaterhouseCoopers in New York. "But with the momentum we're seeing in Washington around health reform, I wouldn't be surprised if something moves forward that will dramatically change the way people think of the tax-related nature of health benefits."

Workers with job-based health insurance have enjoyed a tax exclusion for the full value of those benefits. The value of the tax exclusion is greater for higher-income workers, who tend to have richer employer benefits compared with lower-income workers, who are much less likely to have job-based health insurance, according to an analysis from the Urban Institute.

So we are back to good old class warfare to sell a tax increase on the “rich”. Have we become so disconnected from reality that we actually believe this worn out rhetoric? The truth is that the number of “rich” who enjoy employer health benefits is fairly small and would be an inconsequential income source. The real money is in the middle class.

Capping benefits would present a dilemma for President Barack Obama, who promised he wouldn't raise taxes on workers earning less than $250,000 a year. On the campaign trail, he attacked Sen. John McCain's proposal to end the tax exclusion for employer-provided health benefits. But Obama also has said a health care overhaul must not increase the federal deficit, which puts the issue back into play.

This is just another in a long line of broken campaign promises by Obama. Who would have thought it possible?

Striking a balance between generating enough funds and keeping the tax bite manageable for workers while still being fair to workplaces with different characteristics is a tough job, said Paul Fronstin, director of the health research program for the Employee Benefit Research Institute in Washington.

"Taxing (benefits) will raise money, but it's a blunt instrument that won't necessarily only tax Cadillac plans," Fronstin said. "You're being taxed on price rather than being taxed on comprehensiveness. There are ways to make adjustments for it, but that affects how much money they can raise."

The likely outcome is that emplyers will cut benefits to keep the plan below the governmentatl threshold. What the average worker will end up with is a watered down version of their original health care plan. This will eventually drive more and more workers under the government provided public option. This may be the goal to begin with.

In the first year of having a cap on the tax exclusion, the impact would be minimal across three of the policy options being discussed on Capitol Hill, said Lisa Clemans-Cope, lead author of the Urban Institute report.

"The bite is very small in the first year," Clemans-Cope said. "In 2010, the change in after-tax income for those who have an increase is less than 1%."

But over time, the cap would affect a growing share of the premium for a growing number of taxpayers. Even so, some of the tax bite may be offset by wage gains.

Under a moderate scenario that would raise an estimated $224 billion in income tax by indexing the cap to growth in the gross domestic product, about 38% of taxpayer households would face a tax increase in 2019, according to the Urban Institute's projections. The average tax increase would be 1.6%, equal to $1,260 in income and payroll tax. This example preserves 90% of the tax subsidies.

Sure why not, its only 1.6% of my income. Never mind the other percentage of my income being consumed by rising energy costs and every other manner of taxes pushed through by this liberal administration.

Tying the cap to growth in the consumer price index would raise twice as much money, an estimated $456 billion, but would take a bigger bite out of workers' earnings. It would affect about the same amount of taxpayer households, but the average tax hit would be $2,220, a nearly 3% change in after-tax income, according to the study. This scenario would preserve 80% of the subsidies.

Adjusting the cap to keep up with the rapid rise in medical expenses would generate the least revenue of the three options and would affect taxpayer households the least in the next decade. After-tax income would dip 0.7% on average, equal to $570 in income and payroll taxes, and only slightly more than 14% of taxpayer households would be affected. This example would raise $62 billion.

They are all bad. The one plan that does not seem to be gaining any traction is the one that involves cutting other wasteful programs to pay for the plan without a tax increase. This option never seems to be considered. The wasteful non-stimulus bill would have been enough to pay for their health care plan for the next ten years. Maybe we should kill the stimulus and use it to pay for socialized health care. Just a thought…

The study used a benchmark of how various options would affect taxpayer households in the 75th percentile, where a quarter of them had premiums that exceeded the cap and three-quarters fell below the cap, set at $5,642 for single coverage.

Capping the tax exclusion may create headaches for administrators trying to ensure that workers in high-cost areas and those whose colleagues are older and sicker aren't penalized disproportionately, said Henry Aaron, senior fellow at the Brookings Institution in Washington.

"The question is whether it's done in a way that's administratively feasible and fair and equitable across the country and across different population groups," Aaron said. "On the latter score, it's not so clear it passes that test."

Yes, by all means, rape us all equally. At least we can all cry together.

The bottom line is that this will cost most of us a huge portion of our income but more disturbingly, it will likely cost us our high quality health plans replacing them with eugenics.

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